Poker Pro Tax question

P

Prim

Guest
Hello,

I've recently become a pro online player, and I have a question about how to report (or not report) my poker winnings. I understand most online players don't report their winnings. What's the best way to go about this?
Thanks.
 
Stick66

Stick66

Legend
Prim said:
Hello,

I've recently become a pro online player, and I have a question about how to report (or not report) my poker winnings. I understand most online players don't report their winnings. What's the best way to go about this?
Thanks.

I don't speak for everyone, but I'd have to say it might be a touchy subject here. I know I'm not the only one cautious about responding to someone's first post containing a tax question since this time of year is when the IRS is on the lookout for cheats and IRS employees are free to join this forum.

Especially since this forum is carried on Yahoo's custom RSS feeds, I'd say a response is at one's own risk.

To attempt to safely answer your question: Either ask a local accountant who is licensed to give out accurate advice OR do a Google search on the subject and concentrate on reputable web sources.
 
starfall

starfall

Visionary
It depends on the location you live in. As I understand things in the UK, poker is considered gambling, and as such winnings are not taxable - it's one reason why some people are looking at financial spread betting as an alternative to investing in stocks. I'm no expert, though...
 
beardyian

beardyian

Scary Clown
Awards
2
It does sound a little odd - coming from a "pro" asking "us" about online winnings and taxes?

Wouldnt an expert in money matters such as a bank or even the tax people themselves about where you stand.

This would be just one of the areas that would need investigating before going pro, as after all to be a pro means your income is reliant wholly on poker.

So not knowing where you stood with tax is a little dangerous as you could end up with a big bill simply by not getting "professional" advice first.

Remember Joe Hachem lost a chunk of his wsop winnings even though he claimed it as a hobby!!

IanT
 
starfall

starfall

Visionary
Prim, what you didn't state was where you live, or any details like that. Different US states may have some rules that are specific to the state, and different countries certainly will... you need to be a bit more forthcoming about what you're doing...
If you've already turned pro, and you're not sure, then presumably you can work out the full rate of income tax, and plan on putting that aside while you answer the question about taxation. It's not the best of ideas to ask for advice on a public forum when you're talking potential legal liabilities.

Besides, the question is odd in itself - saying that most online players don't report their winnings, and asking what the best way to go about things is... NOT REPORTING is easy, you do nothing... the question is what you should report if and when you have an income from poker to report.
 
P

Prim

Guest
I realize the somewhat recklessness now of posting this question here. For some reason I was under the impression that this is a close knit community and IRS agents aren't looking here. But who knows, maybe an IRS agent is reading this right now, will demand to get my info from cardschat, and then put a red flag on my tax profile? ;)

I will probably report my winnings to the IRS. I've only been a pro for about 3 months, but I don't want to do this forever. Joseph Hachem won a huge amount on national TV, so of course he needs to pay taxes on it. I win my money from cash games, and those generally are not followed by the IRS as far as I know. I just wasn't sure if the IRS just looked the other way in situations like this or if it's important that I have all my i's dotted and t's crossed when reporting my taxes on poker winnings.

Thanks for your responses.
 
roundcat

roundcat

Creature of leisure
Prim said:
Joseph Hachem won a huge amount on national TV, so of course he needs to pay taxes on it.
Actually, he's from Australia and didn't have to pay a dime!

This is such a grey area in the US. Online gambling (though I hate to even call poker gambling) is prohibited on the state level in some places, so it probably wouldn't be wise to report it on your state taxes if your state is one of those places. I'd report it under gambling winnings on my federal return, though.
 
jromeo024

jromeo024

Guest
I have your answer

Since no-one has given you a definitive answer I will. I have about 3 years of school for accoutning including Income tax I & II, and have done taxes for other people and myself. I am in no way a CPA or a professional. First of all if you are a US citizen you are required to file taxes for any income you have. If you are clearing a large some of profit ( income) from gambling or poker you are required by law to claim it. I am not exactly sure what the number is but I know if you win over 1500 at a casino they take taxes out immediately. Anything under that and you can fly under the radar. The biggest thing about the IRS and taxes is basically the gamble: If you are hiding income you have to be caught, in order to be punished. I don't think the IRS is going to come after me for a couple hundred profit from poker, but if you were makeing alot of money they may. online poker unlike live or casino poker leaves a paper trail that can be followed, along with any bank account info, or assets that you purchase, if the IRS sees you are living pretty well, and not claiming income they will come after you. The thing about gambling (poker) for a living is you can claim your losses against your winnings. This said the best thing for you to do if you are making a living off poker is to keep a log of your profits and losses. Like I said with online poker there is a paper trail to verify this log in case of an audit, with real poker you have some liberty with your losses. ( I didn't say that.) There is a specific section on the 1040 that you use as a professional gambler. As for anymore specifics you will have to do the research or pay someone to do it for you. Hope I helped you a bit, and remember its all if they catch you. oh Yeah if the federal government know the state will know too.
 
roundcat

roundcat

Creature of leisure
Apologies for bumping a few-weeks-old thread, but I ran across an article in Card Player (Feb 2006 issue) last night which addresses this issue. It's by Ann-Margaret Johnson, a CPA and author of the book How to Turn Your Poker Playing Into a Business (www.pokerdeductions.com). Here's what she has to say about taxes and Internet poker:

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There has been a lot of bad advice going around in chat rooms as to what to do when you win money on an Internet site. People are telling each other that as long as you don't move more than $10,000 from your account on the Internet gambling site to your bank account, you don't have to claim it with the IRS. We all know that Internet gambling sites are in foreign countries, which are not governed by United States laws, especially by the IRS. However, the poker player who is playing on a asite at home in his pajamas certainly is.

When you travel out of the United States and come back in through customs, you have to declare if you are carrying $10,000 or more in cash, bonds, checks, and so on. Also, there is a law that you have to declare to the IRS any deposit of $10,000 or more in cash in a financial institution. This is where I believe players are misled.

The rule stinks, but it is this: If you win money on the Internet -- or anywhere else for that matter -- you are supposed to claim it as income on your tax return. As we know, online casinos do not issue government, forms. It's basically on the honor system at this point. Be aware of this: If you get audited, the first thing the IRS will want to see is your bank statements, so that it can look at the deposits going into your account. If the front page of your tax return does not closely resemble the deposits going into your account, you will have a lot of explaining to do.

So, you may think the answer to this may be to just leave all of your money sitting in your Internet account to avoid all of these problems. Not so fast -- as here is another consideration: There is a rule that states that if you have $10,000 or more in a foreign account, you must check box 7A on Schedule B of your tax return. The bad part is that by doing this, you are almost assured of being audited. So, if you keep that money in your account, you need to check box 7A on Schedule B, and you had better report your winings on the front of your return.

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So... basically, if you win money anywhere, including on the Internet, you're supposed to claim it on your tax return.
 
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